Turning a Profit in a Cost-Conscious Industry Customers turn to logistics services providers (LSPs)/third party logistics (3PL) companies because they expect that you will be able to run their warehousing and transportation operations more efficiently and cheaply than they can run it themselves. Tall order! That means you need to run as lean an operation as possible, while at the same time making sure you’re getting paid for each and every service you provide. This brings up a number of questions:
The pressure is on. All you need to do is deliver cheaper warehousing, exceptional inventory visibility, seamless freight management and timely and accurate billing.
1
- Show Me the Money – Adopt Better Billing Practices
Billing
is a tricky business for 3PL companies. Your customers are cost sensitive and
are especially concerned with “cost creep.” They watch invoices carefully and
expect details for questionable charges. If you are like many 3PLs and are
still using a manual billing system, this is a nearly impossible task. Manual
systems usually include many people tallying transactions, and the system has
all the conventional trappings of working with paper. The manual system can be
error prone, inflexible and time consuming. If a customer questions a charge,
it is often more costly to jump through the hoops to find the back-up data than
it is to simply credit the amount in question.
An
automated billing system reduces the chance of leaving money on the table.
Charges are generated automatically each time a warehouse worker performs a
task. Billing can be done using time-based or activity-based methods, and all
customers will have their own separate billing attributes. So the next time your
customer questions a charge, you can drill down to the specific item level to
find out your agreed upon charge for the service and the exact dates and times
the service was provided.
A billing system that reliably captures the charge f or every service you perform can really add up on the bottom line. Say you bill R500 000 in services for one month. Even if you lose only 2-4 percent of those transactions due to manual errors, you’re missing out on R10-20 000 that month.
How refreshing – cost
clarity
In addition to getting paid for all the services you perform, a robust billing solution gives you full visibility into costs with comparison to what was invoiced so you can forecast more accurately and easily assign rates and specials at both the customer and the warehouse level. You’ll have an aggregated view of billing and cost data by customer, warehouse and enterprise, with the ability to drill down into the details to review, edit or delete.
A secret weapon for
your sales team
Better
billing technology can be a great tool for your sales team, as well. Sometimes
your sales people need to get creative in order to land new business. Say your
prospect is a clothing manufacturer and wants you to store sweaters. To service
them profitably you need to add a R2 up-charge to handle the extra large size
sweaters because they take up more space. So the sales person sets up the
billing structure for the new customer specifying the multiple handling rates.
If you are using a manual billing system, this creates a huge headache on the
back end when the billing department tries to match up the special instances
with the different charges. With an automated billing solution, you can pre-set
billing rules at a very granular level, so your sales folks can get as creative
as they want without creating a hassle for the billing department.
2
- Speed the On-Boarding of New Customers
It’s
the proverbial Catch-22. You have a prospect that wants a specific capability
that you don’t quite have yet. And you don’t want to purchase the new
technology or go through the hassle of setting up the new capabilities until
you actually have the customer. The moment the company becomes a customer, they
want your service right away and you still have a lot of work to do to set up
their account before you’re ready to start bringing their goods in.
The
process of taking on a new customer doesn’t need to be so intimidating. A key
part of robust technology is the ability to rapidly on-board customers with a
configuration wizard that can make it easy to configure the data elements for
your new customer. Workflows can be very different for different industries and
customers, but a best in class solution can apply pre-set rules by industry,
plus the rules that are unique to the customer so that your customer is
on-board in days, not months.
3
- Simplify Management of a Multitude of Customers
In
a typical 3PL warehouse with multiple customers, you need to perform different
tasks based on specific industries, products and customers. Your retail
customer might want you to capture style, colour, and size item attributes.
Your food customer might want to know lot number, best before dates, and
expiration dates.
In
order to continually satisfy customers and win new business, you need a
solution that will easily adapt to customers’ needs, instead of asking
customers to adapt their businesses to meet the constraints of your software.
To do this well, you need a flexible architecture that allows for a rules-based
approach to different workflows. The solution should offer dynamic item configuration
on a customer-by-customer basis.
In
addition to your direct customers, each customer has their own customers and
suppliers, as well. Say you are handling a customer’s computers, and then you
are sending the computers on to retail distribution centres. Each of those
retailers has their own rules. So you have multiple customers who have multiple
vendors and multiple suppliers; and everyone has multiple items and separate
sets of rules. To manage this data effectively, you need technology that
enables rules to be granular to the customer, their customers and suppliers
level. A multi-tenant architecture with a business process configuration tool
will help you enforce the exact supply chain preferences each of your customers
require.
4
- Evolve to Offer Value-Added Services
Back
in the day, third party logistics was basically a commodity business. You sold
rack space to store someone else’s goods and received a monthly storage charge
as a result. The industry has evolved dramatically, and 3PL providers are
finding that they need to expand their offerings to attract new customers. Many
3PL providers are not prepared to profitably take on new customers, partially
because out-dated and inflexible IT systems won’t allow it.
A
solution with an adaptable architecture will allow you to provide new offerings
and workflows inherent with value-added services. Any time you can move up the
chain and offer more complex processes you can attract more customers and make more
margin. A best in class supply chain solution will enable you to meet stringent
manufacturing requirements for quality, safety and traceability/genealogy.
Amp
up inventory visibility for your customers
Your
customers want to have access to up-to-the-minute information about their
inventory status. Did those pallets of umbrellas destined for Cape Town already
ship, or can we redirect them to Knysna? You need to provide real-time views
into inventory, orders and even billing, and the best way to do that is through
a Web-portal solution. A secure Web portal provides the basis for real-time
information sharing and improved inventory visibility. This enables
collaboration throughout the supply chain, giving your customers the most accurate
and timely view into their inventory and order status. Customers can make knowledgeable
decisions with the real-time visibility into demand, order status and potential
exceptions.
So
when the radar shows that the cold front has shifted East away from Cape Town and
your customer wants a last-minute change of shipment location, you can access
the up-to-the-minute information to know whether you are able to accommodate
that request.
Providing
visibility is a must, but hand-in-hand with that goes data security. Since most
3PLs have multiple customers, data security can be a real challenge. You need
the architecture in place to provide the ability to limit access to data and
avoid the liability of data security. A true, multitenant architecture will easily
allow for data dependent security controls, so you can grant access to any
employee or customer through role-based security features.
Contributed by: HighJump Software Inc & iWMS
Supply Chain Software (the SA channel partner for HighJump).
